1988] EMERGENCE OF UNJUST ENRICHMENT 407 THE EMERGENCE OF UNJUST ENRICHMENT AS A CAUSE OF ACTIONAND THE REMEDYOF CONSTRUCTIVETRUST M.M. LITMAN• The author discussesthe emergenceof unjust enrichment as a cause of action in Canada today. He offers a substantive analysisof the actionfrom both doctrinaland policy viewpoints,both in the commercialand cohabitationalcontexts. The remedy of constructivetrust is examinedin a similarmanner. TABLEOF CONTENTS PAGE I. INTRODUCTION. 408 II. THE HIS10RICAL CONTEXT OF THE DEVELOPMENT OF UNJUST ENRICHMENT . 411 A. QUASI-CONTRACT AND UNJUST ENRICHMENT. 411 B. RESULTING TRUSTS AND UNJUST ENRICHMENT . 411 C. CONSTRUCTIVE TRUSTS AND UNJUST ENRICHMENT . 413 III. THE CONTEMPORARY RELATIONSHIP BETWEEN UNJUST ENRICHMENT AND THE TRADITIONAL LAW OF RESTITUTION. 413 A. THE RELATIONSHIP BETWEEN THE COMMON INTENTION RESULTING TRUST AND THE RESTITUTIONARY CONSTRUCTIVE TRUST . 415 B. THE RELATIONSHIP BETWEEN THE INSTITUTIONAL CONSTRUCTIVE TRUST AND THE RESTITUTIONARY CONSTRUCTIVE TRUST. 415 IV. THE CONCEPTS OF DEPRIVATION AND ENRICHMENT . 418 A. DEPRIVATION . 418 1. The General Concept . 418 2. Deprivation of Money and Property . 419 3. Intangible Contributions.. 420 4. Interceptive Subtraction . 421 B. ENRICHMENT. 425 V. CAUSAL CONNECTION . 426 A. THE ERROR OF REQUIRING A CONNECTION BETWEEN THE PLAINTIFF'S CONTRIBUTION AND THE DEFENDANT'S PROPERTY. 426 B. PROXIMATE CAUSE . 429 VI. JURISTIC JUSTIFICATION. 431 A. ONUS OF PROOF . 431 B. NATURE OF JURISTIC JUSTIFICATION .......... 434 C. CATALOGUE OF JURISTIC JUSTIFICATIONS. 436 D. RECOVERY FOR DOMESTIC OR HOUSEKEEPING SERVICES . 437 • Professor of Law. University of Alberta, Faculty of Law. Earlier drafts of this paper were presented to the Canadian Bar Association. Saskatchewan Mid-Winter Meeting (February. 1988)and the Canadian Association of Law Thachers Meeting (June. 1988). 408 ALBERTA LAW REVIEW [VOL. XXVI, NO. 3 E. JURISTIC JUSTIFICATION AND STATU'IORY POLICY . 442 1. Unjust Enrichment and Matrimonial Property Statutes . 442 2. Unjust Enrichment and Other Statutes ............ 447 F. JURISTIC JUSTIFICATION AND THE INTENTION OF THE PARTIES . 449 G. LIMITS OF JURISTIC JUSTIFICATION ........... 451 VII. REMEDYING UNJUST ENRICHMENT. THE PROPRIETARY AND PERSONAL REMEDIES ........ 454 A. THE PRESUMPTION IN FAVOUROF THE PERSONAL REMEDY . 454 B. PROPRIETARY REMEDIES . 456 1. Timing of Acquisition of Beneficial Interest . 460 (a) The Insolvency Context . 463 (b) Third Party 'Iransf erees . 465 C. QUANTIFICATION OF REMEDIES ............... 466 VIII. CONCLUSION . 468 I. INTRODUCTION In 1980the Supreme Court of Canada, in the case of Pettkusv. Becker,• elevated unjust enrichment from an underlying principle of the legal system to a full fledged cause of action. The analytical components of this cause of action are presently being shaped and defined. It appears clear that unjust enrichment will develop, if it has not already, into a vital force in the private law system. To this point it has had a major, albeit somewhat controversial, impact on the economic consequences of family relation­ ships, usually involving non-marital cohabitation. It should not be surprising that these relationships are being scrutinized with a view to rectifying the adverse economic consequences suffered by the parties to these relationships. Such rectification is warranted as the reality of family life is that it often has hidden economic consequences which are not fairly reflected in "the state of title". It is vital to realize that the purpose of the law of unjust enrichment in this context is not to re-define the nature of social relationships, but rather to regulate fairly, some of the economic consequences of intimate social life. In the business or commercial context, the law of unjust enrichment has been less controversial, at least in part, because commercial relationships are generally viewed as being "purely" economic in nature. Fair economic regulation of these relationships is not considered to be invasive of the social fa bric. The importance of the law of unjust enrichment stems from its substantive merit and conceptual breadth. It gives expression to the trite but deeply felt socio-economic and philosophical conviction that one should not reap what others have sown. As Laskin C.J. stated in Rathwe/1 v. Rath well, "[a]s a matter of principle, the court will not allow any man 1. (1980) 2 S.C.R. 834, (1980) 117 D.L.R. (3d) 257, E.T.R. 143. 1988) EMERGENCE OF UNJUST ENRICHMENT 409 unjustly to appropriate to himself the value earned by the labour of others!' 2 More generally, benefits generated by a person's investment of time, effort and property should, in the absence of compelling reasons, belong to that person and no other. The contrary conclusion would be patently unfair, demoralizing and, perhaps, even economically inefficient. It is suggested that appreciation of these very basic, yet fundamental points can assist in providing proper guidance to and clarity in the emerging law of unjust enrichment. Though it is always important to focus on the purpose of legal doctrine, in the formative years of the development of doctrine this focus must, above all else, be clear and constant. The doctrinal elements of unjust enrichment were set out by Dickson C.J. in Pettkus v. Becker. These now familiar elements are: 3 (i) enrichment; (rl) deprivation; (ill) causal connection between enrichment and deprivation; and (iv) absence of juristic justification for the enrichment. In retrospect, it is clear that this outline of the cause of action is skeletal in nature and that Pettkus v. Becker is merely a narrow example of this cause of action at work. While most of the cases decided since Pettkus v. Becker have been sensitive to the breadth of the various constituent elements of unjust enrichment, this has not been universally true. In several early cases and, indeed, more recently, the concept of enrichment has been interpreted unduly restrictively. Moreover, particularly in the matrimonial and quasi­ matrimonial context, too often there seems to have been a failure to appreciate that the concepts of enrichment and deprivation, because of their substantive content, are so inter-connected, that the one is merely the "flip side" of the other. It follows that in this context when a deprivation exists, enrichment should invariably be present. On the other hand, in the non-matrimonial context, lawyers seem to have overestimated the breadth of the "causal connection" requirement. As a result, unjust enrichment actions which were doomed to failure were initiated. Moreover, in respect to "juristic justification", the final element of unjust enrichment, the cases suggest that there may be confusion relating to which party bears the burden of proof. This confusion stems from "mixed signals" emanating from Dickson C.J!s judgment in Pettkus v. Becker. This article will review the development of the various component parts of the cause of action of unjust enrichment, developing the assertions made above. Another focus of this article will be the question of whether the action of unjust enrichment has reintroduced the "Chancellor's foot" into the civil justice system. Mr. Justice Martland, in his minority opinion in Pettkus v. Becker, warned that recognizing an action for unjust enrichment would produce "palm tree justice". 4 This was not a new criticism. In England, unjust enrichment, even as a mere rationalizing principle of law, was, and in some quarters still is, considered to be "too nebulous and broad" to be 2. (1978] 2 S.C.R. 436 at 4SS, 2 W.W.R. 101, 83 D.L.R. (3d) 289. 3. Supra, n. l, S.C.R. at 848. 4. Id. at 8S9. 410 ALBERTA LAW REVIEW [VOL. XXVI, NO. 3 of utility in an "inductive system like the common law". 5 The fear is that of subjective and intuitive decision-making and, therefore, inconsistent, uncertain, and even worse, potentially arbitrary results. 6 Though on the whole the cases decided since Pettkus v. Beckerhave been remarkably free of these defects, recent developments will undoubtedly be viewed by some as the realization of Martland J!s worst fears and best prognostications. This article will also consider the remedial alternatives available in cases of unjust enrichment. Just as contract and tort law have available to them an array of remedies to correct wrongdoing, there are various restitu­ tionary remedies available to correct unjust impoverishment. In Pettkus v. Beckerthe proprietary remedy of constructive trust was utilized. Why this proprietary remedy was pref erred over the personal remedy of monetary damages, or, for that matter, why the proprietary remedy of constructive trust was pref erred over the proprietary remedy of equitable lien, was not discussed by the Court. In subsequent cases both proprietary and/ or personal remedies have been employed but, unfortunately, the judiciary has not as yet articulated workable guidelines as to the appropriate remedy. Failure to develop such guidelines and the close association that the remedy of constructive trust has had with cases of unjust enrichment has had an indirect cost. It appears that some courts have equated the proprietary remedy of constructive trust with the substantive wrong of unjust enrichment. In at least two cases plaintiffs were denied relief for precisely this reason. The denial stemmed from the standard trust law requirement that trust property be identifiable. As will be noted in the discussion of remedies, it is at least arguable that the restitutionary constructive trust is not a standard proprietary